Channel Sponsor - Turnaround

5 Solutions to Generate Improved ASC Cash Flow

Written by Jocelyn C. Gaddie, Vice President, Business Development, in2itive Business Solutions |
July 02, 2014

America's healthcare industry is shifting left and right, and creating chaos that is proving costly. Most notably, as reimbursement structures change, healthcare consumers must assume greater financial responsibility for their care, and it's a reality that's leading to sticker shock.

Unfortunately, when healthcare consumers experience sticker shock regarding their treatment and recovery, they become less likely to pay.

For surgery center and hospital business offices, the consumer's state of surprise and subsequent reluctance to pay is understandably problematic. Collecting fees for service is becoming more of a challenge and too many accounts are being dropped into the "120+ Day" bucket, where the task of accounts receivable becomes almost impossibly difficult.

Fortunately, new automated systems and program platforms, such as the in2itive Patient Estimator Tool — created in partnership with Medical Recovery Services — are presenting simple solutions that can help struggling surgery centers generate more cash flow, reconcile accounts and find success in collecting payment on or before the date of service.

Here are five things to keep in mind as your business office works to offset cash flow issues:

1. Prepare for more risk patient payments.It's no secret that there's been a marked shift in the payor paradigm, and it's a change that should have healthcare facilities prepared for greater risk when it comes to patient payments. But where did the shift begin?

On the heels of the Great Depression in the 1930s came the Blue Cross Blue Shield Association and the third party payer concept — this protected hospitals when patients could not pay their bills but, as time went on, also shielded patients from knowing the real costs of healthcare. Now as we wade through the Great Recession, the burden of payment is shifting back to the patient, who is responsible for most or all medical bills.

So what's the downside? Medical bills are unsecured debt, so if a patient is facing economic hardship outside of healthcare, your bills will probably be among the last paid, if they are paid at all.

Care to guess how that has translated for providers like you? In an article published in January 2013, Forbes magazine stated that, "hospitals uncompensated care costs — medical care for which no payment is received — jumped nearly five percent to $41.1 billion in 2011." Their numbers were taken from an American Hospital Association report.

$41.1 billion. That's what hospitals have been forced to leave on the table because they couldn't collect.

2. Expect collection early or at time of service.Knowing the increased risks associated with patient payments, it's important to collect allowable fees at or before the time of service. Programs like the in2itive Patient Estimator Tool are specifically designed to generate that initial payment and then keep patients on track to pay their balance.

While it sounds ridiculous for a hospital to offer services for free, that's exactly what they end up doing all too often. It starts when they're unable or fail to collect for services up front — then they're stuck sending bills and cycling the account through A/R and ultimately increasing your bad debt.

For perspective: it costs an average of $8 to $12 to send a single patient bill, which is usually for sums that should have been collected at the time of service. If your office has to send 100 patient bills every month, that's a minimum of $800 for your facility and as much as $1,200. Now what if you have to do that every month of the year? Suddenly, your facility is looking at annual costs of $9,600 to $14,400 just to bill for fees that should have been paid when your office was face-to-face with the patient.

3. Develop payment protocols for patients and make sure they understand it.One of the most successful means of securing an initial payment is to make sure healthcare consumers understands that your office has structured payment protocols.

Providing a detailed patient estimate, such as those created with the in2itive Patient Estimator Tool, tells patients that your facility is a professional and well-structured organization with specific payment requirements at the time of service.

Furthermore, collecting an initial payment from patients before or at the time of service, even if a balance remains on their account (you've given them a clear payment timeline in the patient estimate), means they have made a conscious commitment to their treatment and recovery. This is an additional benefit that increases the likelihood of the patient fulfilling their payment obligations in full.

By presenting patients with a direct contract in the form of a comprehensive estimate with a detailed payment timeline, your facility is granted some assurance that payment can and will be collected at the time of service, rather than being chased on the backend.

4. Remove ambiguity from the process.When it comes to payment collections and working with patients, we strongly believe that knowing is half the battle. When you provide a comprehensive patient estimate, with clear explanation of what payments are due and by what dates, you leave no room for ambiguity — when patients know and understand their obligation, they are more likely to fulfill it.

This is yet another way in which the in2itive Patient Estimator Tool makes your job easier; it produces a detailed estimate that includes insurance carrier information, procedure details, copay and deductible requirements and a clear breakdown of the patient's financial responsibility.

When your facility applies a program like this consistently, you will see an almost immediate increase in monthly cash flow; you'll also reduce your office's burden of collections by limiting the number of days an account spends in A/R and, by extension, reduce bad debt.

5. Shorten accounts receivable days with better claims organization.According to the ASC Intellimarker Survey (2011) from VMG Health, nearly 16 percent of all participating facilities were strapped with accounts more than 120 days outstanding — not a good sign on the cash flow front.

The reality is this: if an account is allowed to become more than 90 days old, the likelihood of collecting what's owed drops by 40 percent to 80 percent. Why? Because once you've treated a patient and s/he is no longer in pain or danger, that person feels a little less inclined to pay. The obvious solution is to collect, or at least begin collecting, patient fees before services are rendered. This is way estimation and collection tools, in addition to established payment protocols, become most handy.

And remember what it costs to send out patient bills every month? Consider what your facility could do with an extra $9,600 to $14,400 every year — and make every effort to begin collections upfront.

Plan Simply, Save BigSurgery center and hospital business offices are always on the hunt for new and innovative ways to improve A/R and increase cash flow, but the truth is you should start simple and nail down the basics. Prepare yourself and your facility for increased financial risk when dealing with patient payments, and then work with office staff in knowing what information to present so patients are primed for and aware of their financial obligations.

Once you've got the basics in place, know that programs like the in2itive Patient Estimator Tool can be a simple but dynamic and truly valuable means of asking for—and getting—what your facility deserves.